'Acquire companies that are strategic and cultural fit'

Kishor Patil, KPIT Cummins Infosystems' CEO and managing director, talks to Pankaj Maru of CyberMedia News about the company's Q3 performance, role of CPG Solutions and Sparta Consulting's acquisitions and also shares the future outlook of Indian IT industry and much more. Excerpts...

Can you brief about the company's performance and overall business in the ended Q3.

Q3 FY11 has been one of the best quarters in terms of growth for KPIT Cummins. The US dollar revenues registered 53 per cent year-on-year growth and 19 per cent quarter-on-quarter. Organic growth was in double-digits and all our major accounts including Cummins showed encouraging growth during the quarter.

With strong performance in the first nine months of the financial year, we have upward revised our guidance for FY11. For FY11, we expect US dollar revenue growth of 38—40 per cent over FY10 and the PAT growth is expected to be 8-10 per cent over FY10.

During Q3 we completed the integration of the two recently acquired companies namely CPG Solutions and In2Soft. These two companies have together added USD 4.6 million to the total revenue.

Overall we see very good growth environment for our verticals - both automotive as well as energy and utilities. We are seeing very good growth in the US, and Europe too is gradually coming up. We are confident of maintaining the high growth momentum going forward.

In the last two years, your company has made two key acquisitions - CPG Solutions and Sparta Consulting. How much these acquisitions have strengthened KPIT Cummins' solutions and service offerings?

Both Sparta Consulting and CPG Solutions are now playing key roles in KPIT Cummins’ strategy to provide transformational IT consulting services to its customers.

Sparta Consulting has strengthened our capabilities in offering SAP solutions and services to our customers. It has also provided us a solid headstart into a new vertical namely Energy & Utilities. In Q3 we have been selected by two of the large cooperative utilities in North America for deployment and consulting on SAP.

Five of our templatised solutions have been qualified by SAP and we have also recently become SAP Gold Channel Partner delivering SAP Business All-in-One and SAP BusinessObjects to high-growth mid-size businesses across North America.

Similarly CPG has reinforced our Oracle-based consulting capabilities in the engineering, manufacturing and supply chain domains. We see tremendous growth opportunities in supply chain and logistics space due to its close alignment with the manufacturing industry and its ability to help manufacturers reduce distribution costs and thereby generate revenue for the organization.

In addition to CPG Consulting, in order to strengthen our Oracle portfolio we have also completed a practice buy in Q2, which added one of the world’s strongest Oracle Transportation Management team to KPIT Cummins.

All of these strategic transactions have been extremely synergistic and in line with KPIT Cummins’ tradition to acquire companies that are strategic and cultural fit with the organization. The experienced team members from each of these companies have further enhanced our domain and industry expertise providing us the ability to partner better with our customers.

Are you looking at some more acquisitions in the year ahead? Which would be the areas or practice and geographies that fit into the company's need and future acquisitions?

Inorganic growth has been an important driver for KPIT Cummins, and we continue to look for companies that are strategic and cultural fit with us.

KPIT Cummins is very sharply focused on select industries — manufacturing (automotive, discrete manufacturing, hi-tech) and energy & utilities. We have set ourselves a goal of reaching $500 million in revenues by the end of FY13 by focusing on select customers and building best-in-class practices in our core focus areas. Therefore we will look at only those companies for M&A that will either strengthen our existing practices or provide us opportunities to enter into a new cognate industry or one of our focus geographies — Europe, the US and emerging markets.

What is the outlook of the company as far as the Indian IT sector is concerned

The Indian IT industry is transforming rapidly in response to the changes in global CIO priorities driven by pressures on maintaining profitability while accelerating inclusive growth. Key trends that we can observe in the very near future are - costs will force organizations to move towards a “pay-per-use” model. This will mean better utilization of the application with reduced annual support charges. Also companies will move towards “skin-in-the-game” approach and outcome-based models.

IAAS, PAAS and SAAS will gain faster traction than before (the model is now being proved) even with large companies. Companies will focus at business applications, which are outward centric (at the periphery or edge) — supply chain management, warranty management, CRM, etc., and applications will be more mobile (using cloud) on the mobile devices.

KPIT Cummins has very successfully carved a niche for itself to emerge as a partner of first choice for companies in the manufacturing and energy & utilities space looking at enhancing their speed to market by becoming more efficient and innovative enterprises. In the future I am confident that KPIT Cummins will continue to grow at a pace faster than its peers, and remain a sharply focused IT solutions and services provider with deep domain expertise and experience.